VAT Land and Property

Historical overview of legislative changes since 1 April 1989

Until 31 March 1989 most property transactions were exempt or zero rated. However, on 21 June 1988 the ECJ ruled that some of the UK zero rates were unlawful because they did not benefit the final consumer or follow a clearly defined social policy. Following the ECJ decision, zero rating was confined to dwellings, communal residential homes and a limited number of charity buildings. This ruling necessitated major changes to the UK legislation which took place on1 April 1989.

Summary of legislative changes since 1 April 1989 (apart from option to tax, which is covered in VATLP26000)

The following table contains details of the legislative changes since 1 April 1989:

Date

Change

Legal reference

1 April 1989

Freehold sale or grant of a lease in excess of 21 years, of a non-domestic building or site became exempt (but see below for new buildings).

Schedule 9, Group 1, Item 1

1 April 1989

Freehold sale of a new, or partly completed, non-domestic building became standard rated.

Schedule 9, Group 1, Item 1(a)(i)-(ii)

1 April 1989

Freehold sale of new, or partly completed, civil engineering works became standard rated.

Schedule 9, Group 1, Item 1(a)(iii)-(iv)

1 April 1989

Where the major interest granted in a new dwelling is a lease or tenancy, service charges and rental payments (other than the first one) are excluded from the zero rating.

Schedule 8, Group 5, Item 1, Note 14

1 April 1989

The freehold sale of sporting rights became standard rated.

Schedule 9, Group 1, Item 1(c)

1 April 1989

The supply of space and stands to exhibitors for displaying or advertising goods became exempt.

Schedule 9, Group 1, Item 1

1 April 1989

The grant of any right to occupy a box, seat or other accommodation at a sports ground, theatre, concert hall or other place of entertainment became standard rated.

Schedule 9, Group 1, Item 1(l)

1 April 1989

The law was amended to make clear that the provision of accommodation in a caravan or houseboat is not zero rated.

Schedule 8, Group 9, Note (b)

1 April 1989

The supply of seasonal caravan pitches became standard rated.

Schedule 9, Group 1, Item 1(f)

1 August 1989

The option to tax was introduced. See separate historical overview in section 26000.

Schedule 10, paragraph 2 - 4

1 August 1989

A self-supply charge on developers of new non-domestic buildings and civil engineering works was introduced.

Schedule 10, para 5-6

1 February 1991

The supply of new holiday accommodation became standard rated. The term “holiday accommodation” was clarified so that chalets and beach huts were included.

Schedule 9, Group 1, Item 1(e) and Notes 11-13

1 February 1991

The supply of a dwelling, or a site for dwelling, to be used as holiday accommodation became standard rated.

Legislation amended to formally include surrenders and reverse surrenders in Item 1 for exemption.

Schedule 9, Group 1, Item 1, Notes 1 and 1A

19 March 1997 - deemed to have always had effect

Section 96(10A) introduced to confirm that where the grant of the interest in a property gives rise to subsequent supplies the VAT liability of the subsequent supplies is based on the circumstances at the time of the supply and not the circumstances at the time of the original grant.

VAT Act 1994 Section 96(10A)

9 April 2003

Subsection 96(10B) introduced to prevent section 96(10A) applying to the freehold grants of new commercial buildings and the freehold grant of bare land with the subsequent construction of a commercial building.

Section 51A & Schedule 10 paragraphs 8(2) & (3) (Treatment of co-owners of land/beneficial interest) repealed before coming into force. These had been inserted by FA 1995, but with effect from an appointed day.

VAT Act 1994 Section 51A & Schedule 10 paragraphs 8(2) & (3).

1 October 2012

The change in law affirmed the provision of storage facilities is standard rated. Paragraph (ka) was inserted by the FA 2012. As a consequence of the change in legislation under paragraph (ka), the following legal notes were added to define and clarify certain terms (15A,B,C,D,and E) which were also inserted by the FA 2012